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ALTHOUGH much has been said about the elitist nature of World Economic Forum (WEF) meetings in Davos, many people don’t know that the work carries on behind the scenes in between meetings.
Many research papers are commissioned, blogs written and focus groups interact under the umbrella of this not-for-profit foundation. The current rise in protectionist thinking around the world is a result of people feeling left behind economically by a more globalised and hi-tech world.
The WEF has commissioned and published a report this month that focuses on inclusive growth.
This topic has been an issue of great concern for global leaders, and consensus is fast swinging away from the previously held view that the “trickle-down effect” will create wealth for all as long as the economy is growing. To show how pervasive this problem is across the globe, the panel that discussed this topic on January 19 at Davos included the finance ministers of Rwanda (a low income country) and Canada (a highly advanced economy).
The 75-page “Inclusive Growth and Development Report 2017” published by the WEF in their words “provides a practical guide for policymakers and stakeholders seeking to build a strategy to capture greater synergy between economic growth and more broadly-based progress in living standards in their countries”.
The policy framework covers various areas and is divided into seven pillars. Quite topical for South Africans is the education pillar, which says policy should provide access to quality education in an equitable way. Another topical area at WEF 2017 has been the thinking around a basic income for all, or some sort of social security net.
Transfers from richer to poorer citizens
In the policy framework this is included under the fiscal policies that also call for a tax regime allowing for transfers from richer to poorer citizens. Although the report stresses that there is no one framework that will work for all countries, it certainly provides valuable input into how policy makers can make their economies more inclusive.
In order for countries to benchmark themselves and monitor progress on the inclusiveness of their economies, a set of key performance indicators (KPIs) is proposed. This allows countries to measure their “bottom line” performance of economic inclusiveness and benefits to the population, rather than just the “top line” performance of GDP growth.
These KPIs are then combined into an inclusive development index that can be used to indicate relative level of inclusiveness and the trend for each country. This is a practical tool for investors too, and in our view an outcome of the WEF that shows it is not just a talk shop, but that it can influence policy decisions in the future.
To show how policy can impact longer-term growth, one can compare Kenya with Nigeria. Although neither economy is perfectly managed, Kenya has consistently invested more of its resources in improving its infrastructure than Nigeria. This sets it up for a more sustainable growth path over the next five years, while Nigeria still plans to invest heavily in the near term.
Of course, if growth is not inclusive it can lead to significant unhappiness among the population and unrest, another factor to take into account when making investments across Africa.
* Paul Clark is Africa portfolio manager at Ashburton Investments. Opinions expressed are his own.
